As a SaaS you’re concerned with several metrics which denote whether or not you are successful. One of those key concerns for every SaaS is churn — the percentage of customers who cancel.
For early stage SaaS, growth is a major focus and often given more attention than anything else. It’s understandable really; many are racing the clock to grow at sufficient rates to warrant a funding round or to turn a profit before funding runs out.
However, does this scenario sound at all familiar? Many go into an absolute flurry of growth activities due to a critical need to hit those numbers. When “numbers, numbers, numbers” becomes the main goal, anyone and everyone is encouraged to come onboard and you end up with growth for growth’s sake.
Even if those customers are not a good fit.
What does this have to do with churn? Well, customers who are not a good fit are the first to go, possibly after complaining loudly about how this or that in your SaaS is not good for them.
This matters, it really does. Wouldn’t it be better to onboard those who are the right fit and whom you are confident you can serve well in the first place? Often a lot of time and resources go into trying to appease customers who are not a good fit, only to have them exit anyway.
What can your SaaS be doing to attract the right customers?
Know Your Customer First
Assuming your SaaS has done considerable market research, identified a clear problem and built a unique product which really solves that problem better than competitors, knowing exactly who your ideal customer actually is for your product is key for attracting the right people.
This is critical for keeping that all-important churn rate down. As Lincoln Murphy states; “In my experience, churn is often correlated to things that happen early in the sales process… and this starts with attracting the wrong customers.”
Why and how are SaaS attracting the wrong customers in the first place? It often comes back to that “numbers, numbers, numbers” focus on growth. Either the SaaS simply doesn’t know who their ideal customer is and takes the scattergun approach, or they do know, but choose to ignore that fact because they’re afraid they’ll miss opportunities if they don’t try to accommodate everyone.
For starters, you simply can’t accommodate everyone. How many businesses can you name who do? Secondly, this strategy becomes tricky because oftentimes, your messaging becomes confusing to customers.
If you’ve ever landed on a website and had to spend considerable time figuring out what they did and who they were for (if you even gave it that chance), you’ll know what we mean. SaaS who try to appeal to everyone risk attracting no one.
The main lesson? You need to carefully identify exactly who your ideal customers are so that you can tailor your messaging to them. This helps to deter the wrong customer from even signing up.
Quick Checklist: The Wrong Customer
Who is the wrong customer? Here are a few clues:
- They need a lot of help or just don’t get your product.
- They don’t recognize the value of what you’re offering.
- They can’t really get to a point of realizing value by using your app.
- You simply didn’t build your feature set with this person in mind.
Get “Your Customer” Centric
Now that you know who your ideal customer is, it’s time to take a stance where that customer is at the center of all you do. Again, it’s about ensuring that you’re not taking that everything to everyone approach.
Your messaging should be explicitly clear from the second a prospect lands on your website. Remember that they usually want to know two things initially:
- What exactly is this?
- Is it for me?
Your website copy should reflect a focus on your target audience, as should all of your other marketing efforts. We recently wrote a piece on creating a marketing plan with no budget. The items discussed in there; forums, blogs, influencers, social media and beta test communities are all great opportunities to find and onboard your ideal customer, as long as each of those things are looked at through the lens of targeting them specifically.
For example, when creating content, which keywords or phrases are your target customers searching for? What problems or challenges do they tend to have which you can write about in your blog?
When looking at forums, influencers, social media, guest blogging or any other kind of external promotion, where does your target audience hang out? Who has an audience similar to what you are looking for and is willing to promote you?
If there’s any key lesson to be taken from this it’s simply be clear. Your new accounting app may be perfect at an enterprise level but too feature rich or out of reach for small businesses. This means you should be targeting the topics and online hang-outs of your enterprise-level target customer, not confusing things by creating catch-all content which may seem to be for the small business owner too.
Creating logical segments from your customer base helps you to really hone in on who your ideal customers are within your entire list. As Lincoln Murphy points out, these are often a minority within a wider customer base.
“Customer segmentation allows you to not just know who your best customers are based on their profitability, (estimated) lifetime, characteristics, actions, demographics, etc. but allows you to perform further cohort analysis to determine factors at play when they signed-up, what channel they came in from, etc.” – Lincoln Murphy
Ideal customer may have a definition which you need to hone over time, especially if you have a new product. You may have developed customer personas early on, but many find that they need to modify these with time as they figure out the characteristics of those who are their best customers.
Segmenting your customers allows you to be extra-targeted with your messaging. You can actually make sense of the marketing data you are gathering and optimize for better customer engagement.
Understand Customer Success
It’s one thing to attract the right customers, but of course a key to keeping those churn figures down is to actually keep them. Customer success is a term which has been tossed around a lot in SaaS over the last few years and simply means that the customer achieves whatever their desired outcome is from using your product.
The somewhat complex thing about this is that, while you can make extrapolations and assumptions, customer success is going to look different to different people. It will very much depend upon what their own goals and priorities are.
Essentially, you need to be talking with customers, understanding where they’re coming from and being available to help them realize value from your app. This also gives you an opportunity to manage expectations and ensure that customers are taking the appropriate steps to see success using your software. You don’t want people thinking they should immediately get some amazing result if the reality is they need to work at it over time.
In another Sixteen Ventures article, Lincoln Murphy recommends that you should also identify and understand what your customer success milestones are — those points which need to be reached for the customer to move next-level or really see results. Customer fit
SaaSler brings up another valid point; give some thought to how third-party integrations might boost customer success in your SaaS. These can really help to take your app to the next level for customers, boosting their feelings of loyalty.
The point? Onboarding the ideal customer is great, but to reduce churn you need to keep nurturing the relationship and ensuring that value is delivered.
Who Is Your Ideal Customer?
While numbers like growth, retention and churn are rated highly by SaaS, it’s important that they don’t get so caught up in a numbers game that they onboard simply anyone, regardless of fit with the product.
A much more sustainable strategy is to devote your focus to attracting and retaining customers who are an ideal fit for your SaaS. This way, they will see the value of your product, will stick around and may even become advocates of your brand.
At Koombea we create beautiful apps that cater to the needs of your target customer. Talk to us today to find out more.